Published July 08, 2013
BOSTON – Hedge fund manager William Ackman is ready to bet big on an unnamed U.S. company and is asking pension funds and endowments to commit $1 billion to two new funds by the end of next week to help him make that investment.
"We are launching two new co-investment funds PS V, L.P. and PS V International," Ackman wrote in a three-page letter dated July 8 and seen by Reuters. "Because of confidentiality considerations, it is not prudent for us to share the target company name with all of our 500+ investors," he added.
Ackman, whose $12 billion Pershing Square Capital Management has made winning bets on U.S. corporate icons like Procter & Gamble and McDonalds , offered only hints about his target. Essentially, he is asking investors to trust him by committing at least $1 million by July 17. The funds must be wired by next Friday, July 19.
One unnamed institutional investor is ready to commit $200 million, Ackman wrote in the letter.
A spokeswoman for Ackman declined to comment on the matter.
To whet investors' appetite Ackman said the business is "simple, predictable, and free-cash-flow -generative and enjoys high barriers to entry." But like many of the companies Ackman invests in, this one has room to perform better and its stock price therefore trades at "substantially lower multiple of earnings than its most comparable competitor," he wrote.
For Ackman and his fund, this may mark his biggest investment since he unveiled a $1 billion short bet against nutritional supplements company Herbalife late last year.
While Ackman has one of the best performance records in the $2.25 trillion hedge fund industry, this year's returns have been tepid, with gains of only about 6 percent in the first half.
Eventually Ackman said the target company's name will come out because the New York-based hedge fund will be forced to make a regulatory filing when it acquires 5 percent of the company.
Looking ahead, Ackman said he plans to "engage with the company's management and board."
This might send a chill down corporate America's spine because chief executives at two companies where Ackman is involved have recently lost their jobs: Ron Johnson at JC Penney and Bob McDonald at Procter & Gamble.
Ackman has made similarly concentrated bets before, including one on retailer Target when he launched a special purpose vehicle in 2007. That fund lost some 90 percent in value forcing Ackman to apologize to investors and call it a great disappointment.
(Reporting By Svea Herbst-Bayliss; Editing by Leslie Gevirtz)